Tuesday, July 31, 2012

Schedules of Condition - A picture paints a thousand words

The initial cost of a schedule of condition will often be significantly lower than the savings that are likely to be made at the end of a lease term, which actually makes a schedule of condition extremely good value for money!

The value of a schedule of condition is often underestimated and regularly seen by tenants as an additional extra that they can afford to do without.   A recent survey of landlords confirmed this (click on the link below for the full article):

"Clear documentary evidence on the condition of the property is critical in order to overcome, for example, differing expectations of what constitutes clean... 
 Many landlords in the LetYourProperty.tv poll said they were worried about professional inventories (Schedules of Condition) being too costly, even though this may not be the case"                                                                                          
                                                                       Source: Stride Independent Insurance Specialists
It is interesting that the article refers to 'inventories', because this is what a schedule of condition actually is and not the detailed description and analysis of defects which many assume to be the case. This is not helped by the many consultants who incorrectly define the purpose of a schedule of condition on their websites and other marketing literature.  For the purposes of clarity, a schedule of condition is a photographic and textual record of a building/structure/piece of land at a defined moment in time, a snapshot if you like.  It's main purpose is to provide a record of historical evidence that can be used to limit liability in the event that a landlord may be claiming that a tenant has damaged a building.  Through the schedule of condition the tenant then may be able to prove that the damage already existed and therefore limit their dilapidation's liability.  In these situations the initial cost of a schedule of condition will often be significantly lower than the savings that are likely to be made at the end of a lease term, which actually makes them extremely good value for money!

If a more intrusive survey is required to consider and advise on the condition of a building then a building survey or a structural survey may be necessary.  These types of surveys will provide much more that a description and photographs, and will actually give a detailed analysis of the defects within a building together with an explanation of the probable cause, recommended remedial advice and if required a budget cost estimate for the remedial works.  There  are many different types of surveys that can be undertaken and it is important that professional advisers clarify the brief with their clients to ensure that they are providing the right type of survey.  

Although schedules of condition are commonly associated with commercial leases, there are other situations in which they will be used.  For example, where any proposed work may have a detrimental effect on adjacent structures or land.  A common example of this is works that fall under the scope of the Party Wall etc. Act 1996.  Any work to a party wall or an adjacent excavation within three (or six) metres and below the level of the existing buildings foundations has the potential to cause significant damage.  If a schedule of condition is prepared, before works commence, then adjoining owners cannot make exaggerated claims for damage if the schedule of condition shows that the damage was there before the works commenced.  Even if it is established that works do not fall under the scope of the Party Wall Act, it still may be advisable to prepare a schedule of condition if adjacent buildings are in a particularly poor state of repair, where there are 'sensitive neighbours' or where works are of a particularly risky nature.  

Compared to other types of inspections/surveys schedules of conditions were relatively easy to prepare, because all I was really doing was describing what I saw.  There was no requirement to provide detailed analysis or advice and this sometimes gave welcome relief from the more intense types of inspection that I would carry out.  To be effective a schedule of condition must be prepared professionally (accurate descriptions and good quality photographs), and at the right time.  Therefore, the schedule would be prepared and attached to the lease and signed by both the landlord and the tenant or their representatives.

If you are a tenant who thinks that a schedule of condition is something you can do without then think again and consider the long term value that this will provide.  This advice is not exclusive to commercial tenants, but also to residential tenants including short term tenancies such as student lets.  It would be much more difficult for a landlord to withhold a deposit if you can prove that the damage being claimed existed prior to your occupation!

Information/opinions posted on this site are the personal views of the author and should not be relied upon by any person or any third party without first seeking further professional advice. Also, please scroll down and read the copyright notice at the end of the blog.

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